Unless there is an Order of Credit, estimates of future liability may?

• A. Always be reduced by the amount of third party recoveries
• B. Never be reduced by the amount of third party recoveries
• C. Always be reduced by the amount of third party recoveries up to $10,000
• D. Reduced but only by the sums deposited in the Trust account in the reporting year

Answer: (B)

The notion that estimates of future liability may never be reduced by the amount of third-party recoveries is grounded in the principle that such estimates should reflect the total potential liability without considering external recoveries. Future liabilities are often based on the worst-case scenario, which ensures that all potential costs are accounted for without presuming possible recoveries from third parties.

In self-insurance contexts, this approach is crucial for maintaining a conservative and adequately funded reserve that ensures financial stability in case of unforeseen expenses. By not reducing future liability estimates based on recoveries, organizations can better prepare for the full scope of their obligations, thus safeguarding against underfunding and the risk of financial strain.

Contrastingly, the other options imply varying situations that either allow reductions based on recoveries or impose specific limitations on the amounts related to third-party recoveries, which is not consistent with the established approach to estimating future liabilities in a self-insured context.